None of the officials involved have disclosed potential terms that might be on the table.

State Health Secretary Alan Levine said last week that a lease or sale to Children's would be an ideal use of the NOAH property, which the state closed last year as it shifted inpatient mental health beds to a state hospital in Mandeville.

"Our primary interest is to ensure we leave all options on the table so LSU and Children's can negotiate an agreement that allows Children's Hospital the ability to develop a long-term solution for their need for expansion," he said. "We want to allow them the ability to acquire, in whatever form, the property they need to have a sustainable growth strategy."

Such a deal would satisfy the terms of Rep. Neil Abramson's House Bill 1150, which has passed the Louisiana House of Representatives and awaits action in the Senate. Abramson, the New Orleans Democrat who fought the Jindal administration's closure of the Adolescent Hospital last year, wants to allow the state to lease or sell the property but only on the condition that it remain a health care or health education facility.

The state acquired the property through a Dec. 16, 1981 transfer agreement from the federal government. That deal specified that the property would be used for "general health care" services for 30 years, a period that expires in December 2011.

Before Katrina, the property primarily housed inpatient care for children and adolescents suffering from mental illness. After the storm devastated the city's mental health care infrastructure, the state used some beds for adults and added outpatient functions.